BP Plc wants to surrender KG basin block after restrictions

NEW DELHI: UK's BP Plc has offered to surrender a KG basin block after restrictions imposed by the Defence Ministry made oil and gas exploration practically impossible in it.

BP along with Reliance Industries had won the deep-sea KG-DWN-2005/2 or KG-D17 block in the seventh round of auction under New Exploration Licencing Policy (NELP) in 2008.

About 70 per cent of the 1,949 square kilometre of the block falls in an area where DRDO and Navy exercises are conducted and has been classified as 'Impact Zone' where oil and gas operations are not possible, BP wrote to the Oil Ministry last month.

"Given 70 per cent of the block area falls under the Impact Zone required for Navy and DRDO testing, the block practically becomes a 'No Go' zone for continuous exploration and subsequent developments activities and prevents contractors (BP-RIL) from carrying out petroleum operations," it wrote.

Since the block size is small, flexibility to make any design changes to mitigate the impact of Defence Ministry requirements was severely restricted.

BP said the block was in early stages of exploration period and "any further exploration operations will be constrained as they need to be managed around naval and DRDO testing and exercises."

Also, even if any oil and gas is discovered, BP-RIL would not be allowed to install permanent infrastructure in the area.

"The Ministry of Defence requirements for testing and carrying out exercises have led to the introduction of significant risk and high uncertainty beyond the control of contractors," it wrote.

BP said due to the restrictions it will not be able to meet the minimum work commitment it had given at the time of winning the block.

The company had committed to do 2D and 3D seismic survey of the entire block.

"We would therefore, be prepared to relinquish the KG-DWN-2005/2 (KG-D17) block," it said, adding the company was willing to consider an option to carry out a similar level of activity if equivalent new acreage is given in mutually agreed area.

Previously, Cairn India had told the Oil Ministry that a large part of its KG basin block has become operationally infeasible because of new limitations imposed.

Cairn on April 26 wrote to the Ministry 35 per cent of its KG-OSN-2009/3 block is 'No-Go Area, which runs right through the block, leaving small portions on either side for exploration.